The “fantastic moment”, as described by PM Johnson last week, follows his signing of the Withdrawal Agreement Bill to which the UK will leave the EU on the 31st January. In a statement following the signing at Downing Street, he said that this signing would end years of “argument and division”. With the exit from the EU spanning over 3 and a half years and through 2 governments, there has been great anticipation as to what is in store for the UK and Europe moving forwards.
Amongst the 600-page document contains the agreement for the UK to stay within the single market and to retain an open border with Ireland. Whilst some elements of the previous relationship with the EU are set to remain unchanged, other aspects are likely to differ. The Food and Drink Federation have put out warnings that food prices may be set to increase this year following the divorce from the EU. Businesses have also been advised to prepare for all eventualities that follow the divorce. With many potential changes on the horizon, there will be close attention paid to the latest developments in the final few days leading up to the deadline.
From a interbank rates perspective, GBP/EUR has seen an increase throughout last week with levels moving from the 1.17 experienced at the beginning of the week up to the peak on Friday’s trading levels at 1.1920, then down to the current 1.1855. The GBP/USD has also seen some volatility in both directions with rates moving between a range of 1.2965 and 1.3172 last week.
Brexit aside, there is also the Interest Rate Decision scheduled for this Thursday 30th. Current suggestions from Lloyds Bank and Bloomberg have eased predictions of a rate cut from 70% down to 50%. This provided a lift for the pound last week as a rate cut is indicative of trying to stimulate the economy following sluggish growth for the UK in Q4.
Most of the economic data for the Eurozone came out last week in the form of the unchanged interest rate decision from the European Central Bank (ECB) President Christine Lagarde. This response lead to a weakening of the euro against most of its major currency counterparts such as GBP, USD and CAD.
For this week, just like the sterling section, all eyes are focused towards any progress or statements made by EU or UK politicians in the runup to the divorce deal on Friday.
Smaller data releases for the Eurozone come in the form of the unemployment rate release on Thursday and the subsequent and more volatile Harmonized Index of Consumer Pricing. This release will indicate the price and stability on the costs of living to assess the current economic climate. Increased prices suggest a growing GDP and thus can lead to growth for the euro.
For clients holding on involving euros who wish to evaluate their positions on their transfers please get in touch with your account manager on the trading line on +44 (0)1494 725 353.
The USD, just like their European counterparts, have many upcoming events that are yet to be baked into the currency market.
This Wednesday marks the release of the US Interest Rate Decision. The current 1.75% levels have been reduced gradually from the higher 2.5% levels seen in 2019. Should the US Federal Reserve chairman Jerome Powell cut levels again it will be a hawkish approach suggesting a slower economy and reduced growth levels. In this event, it has the potential ability to reduce the strength of USD rates.
In a separate development, the recent spread of the Coronavirus has now seen 41 deaths according to the BBC and is continuing to spread throughout. It has even moved internationally to surrounding Asian countries, the United States and Scotland. With growing global concern towards public safety, this is typically a period to which investors look towards the USD. Its safe-haven status in times of political, economic and now social uncertainty makes it a suitable currency to invest into as it generally sees smaller fluctuations that other majorly traded currencies.
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